Hey Income Hunters,

Santa Claus Is Warming Up the Sleigh — The Rally Window Is Opening

Just when most investors are mentally checking out for the holidays, the market is quietly setting up one of its most reliable seasonal moves of the year — the Santa Claus Rally.

And according to the historical data, the clock is ticking.

For decades, the strongest stretch of the Santa Claus Rally has occurred between December 24 and January 3 — a narrow window when liquidity thins, tax-loss selling fades, bonus money hits accounts, and optimism replaces fear. 

That window is opening right now.

Even more interesting?
The last two years were negative during this period — and historically, the market has never produced three negative Santa Rally periods in a row.

That alone should have investors sitting up in their chairs.

What Is the Santa Claus Rally — Really?

The Santa Claus Rally isn’t folklore. It’s a measurable seasonal phenomenon observed since the 1950s

Historically:

• The S&P 500 rises about 1.3%–1.7% on average during this window
  
  
• Roughly 75%–80% of years are positive
  
  
• Gains during this period often set the tone for January
  
  

When Santa shows up, he often brings momentum traders, short-covering, and performance-chasing fund managers with him.

Why the Last Two Years Failed — And Why That Matters Now

The last two Santa Rally windows were disappointments:

• Heavy macro uncertainty
  
  
• Aggressive Fed tightening
  
  
• Persistent inflation fears
  
  
• Tax-loss selling that lingered too long
  
  

But here’s the key insight for long-term investors:

The “official” Santa Claus Rally begins on December 24. It covers the last 5 trading days of December + the first 2 of January. SPX was up 77% of the time. 

The last 2 were negative, but there has never been a third straight down Santa Claus Rally. The chart below shows S&P 500 returns during the Santa Claus Rally: